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Chapter8

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  • 1. Chapter 8IntegratedEnterprise Systems
  • 2. Objectives• Understand Integrated Information Systems• Different types of Integrated Systems• Understand ERP, CRM and SCM Systems• Role of Integrated systems for competitive advantage• Identify the advantages and disadvantages from business perspective.
  • 3. Functional Systems• Information Systems solutions created for specific business application like Finance, Sales, or Manufacturing.• Functional systems were created to create effectiveness and efficiency in the functional area by understanding the internal needs of the area.• This approach created islands of information systems within an enterprise, which means no functional system interacting with any other system.• Leading to lot of data duplication, data redundancy and data inconsistency, which resulted in inefficient and ineffective process.
  • 4. Integrated Information Systems• For the organizations to remain competitive in the current century, it is important for them to integrate their functional systems.• An integrated information system helps the organization to integrate all the functional systems.• Data is captured where it make more sense.• Data is validated at source.• Address problems like data duplication, data redundancy, data inconsistency and also improve communication between functional areas.• Integrated information systems allow sharing of data across functional areas and also allow joint execution of business processes across departments, allowing the effective management of cross-functional teams.
  • 5. Evolution of Integrated Systems• 1960s: software packages with inventory control• 1970s: MRP systems – Production schedule with materials management• 1980s: MRPII systems – Adds financial accounting system• 1990s: MRPII – Integrated systems for manufacturing execution• Late 1990s: ERP – Integrated manufacturing with supply chain• 2000s: ERP II – Includes end-to-end ERP system with web integration, supply chain management (SCM), customer relationship management (CRM), knowledge management (KM) and business intelligence (BI)
  • 6. Enterprise Resource Planning (ERP)• ERP is an integrated enterprise wide information system solution that integrates across functions, across management hierarchies and across locations.• ERP is a system solution that is designed to integrate all data, resources and processes that are required to complete a business functionality like managing inventory, production scheduling etc.• An ERP system is usually based on a common database that allows every user to store and retrieve information on real-time basis, irrespective of department, management level and location.
  • 7. What is ERP?• Software tools• Manages business systems – Supply chain, receiving, inventory, customer orders, production planning, shipping, accounting, HR• Allows automation and integration of business processes• Enables data and information sharing across enterprise• Introduces “best practices”
  • 8. Legacy System Vs. ERP Systems• Legacy System – Legacy systems are one which are developed primarily in-house on need basis using conventional programming languages. – Normally not driven by organization strategy and business vision. – Develop one application at a time. No integration between applications – just transaction passing. – Decentralized applications. – Are relatively inflexible to accommodate changes in the business environment. – Written in language / platform prevalent at the time of development. – Up gradation to latest technology is difficult – Maintenance is a problem – largely because of poor documentation and staff attrition.• ERP – ERP systems are integrated information system solutions. – ERP programs help manage enterprise-wide business processes using a common database and shared management reporting tools. – ERP system supports the efficient operation of business processes by integrating activities throughout a business. – Allows automation and integration of business processes – Enables data and information sharing – Introduces “best practices” – Overcomes inefficiencies of independent systems
  • 9. Best Practices• Best practices are the tested effectives and efficient practices being followed across the world to accomplish a process.• Best Practices represent the way an ERP company feels a particular business transaction should be carried out to maximize efficiency.• These "Best Practices" are what the Vendor deems as the most efficient way to carry out a particular business process in an Integrated Enterprise-Wide system.
  • 10. ERP Components• ERP systems are modular.• It supports multiple modules each for a given functionality.• All functional modules share data among each other using common databases.• ERP Components are: – Finance – Sales & Distribution – Materials Management – Production Planning & Control – Human Resource Management – Business-to-Business
  • 11. Advantages of ERP• Streamlines or eliminates inefficient manual processes• Eliminates disparate stand-alone systems• Provides integrated, enterprise-wide common tools, processes and systems leading to proper communication, productivity and efficiency• Establishes a backbone structure that can be leveraged to handle all operational processes• Integrates and increases control of budgeting, planning and financial management processes• Order tracking, from acceptance through fulfillment• Managing inter-dependencies of complex processes• Tracking the three-way match between purchase orders, inventory receipt from suppliers and supplier payments.• More secured system from intentional and un-intentional risks.• Each department works independently of other department in an integrated system.• Serving the customers efficiently by way of prompt response and follow up.• The database not only becomes user friendly but also helps to do away with unwanted ambiguity.• ERP is suitable for global operations as it encompasses all the domestic jargons, currency conversions, diverse accounting standards, and multilingual facilities.• Provides enterprise-wide reporting and decision support• Presents opportunity for re-engineering with industry best practices and templates• Presents opportunity to lever vendors’ future investment in enhanced functionality• Incorporates new functionality and technology - provides a springboard to e-Business
  • 12. Disadvantages of ERP• Focus on applications rather than business processes• Lack of ERP project management expertise• Scope and change management• Sub-optimization of system capabilities• Staffing and retaining full time project resources• Experienced implementation partners• Product maturity and limitations• Customization of the ERP software is limited.• Re-engineering of business processes to fit the "industry standard" prescribed by the ERP system may lead to a loss of competitive advantage.• ERPs are often seen as too rigid and too difficult to adapt to the specific workflow• Resistance to share internal data by key employees, results in poor effectiveness of the software.• The system may be too complex measured against the actual needs of the customers.• ERP Systems centralize the data in one place, example customer , financial data. This can increase the risk of loss of sensitive information.
  • 13. Steps involved in ERP Implementation• Process Identification• Configuration• Customization• Data Migration• Maintenance & Support
  • 14. Conversion Strategies• Phased implementation• Big-Bang implementation• Process-Oriented Implementation• Vanilla implementation
  • 15. Customer Relationship Management• CRM is an integrated information system solution that allows identification, acquisition, retention and expansion of customers.• Customer Relationship Management is the establishment, development, maintenance and optimization of long term mutually valuable relationships between customers and organizations.• CRM is about creating a competitive advantage by being the best at understanding, communicating, and delivering and developing existing customer relationships in addition to creating and keeping new customers.
  • 16. Building CRM Strategy• A good CRM strategy will take the business vision and apply it to the customer base by asking the questions: – What products and services are we offering now and in the future? – In what markets? – What customer groups will these products and services appeal to? – Which of these are of most value to the organization? • In terms of spend? • In terms of reliability? • In terms of profitability? • In terms of growth potential? – What additional needs do the most valuable customer groups have? • Additional products? • Additional services? – What different ways can we be doing business to deliver to our customers better? – What value will CRM deliver to the business?
  • 17. Extracting Diamond from CRMAdvanced data analysis techniques can produce statistically grounded behavioural models that more accurately project customer behaviour in a variety of situations:• the likelihood of purchase of a specific product or service.• the best next offer.• the probability of defection.• Customer retention – Model those customers who have defected (churn modeling) – Identify patterns that led them to defect (churn) – Apply model to current customers to identify who are likely to churn• Sales and customer service – Market basket analysis finds sets of items that appear frequently together in a single purchase – Facilitates better point of purchase merchandizing • Floor and shelf layout • Web page catalog design• Marketing – Customer profiling • What type of customers buy what products – Direct marketing • What customers to target with what promotions – Market segmentation – Cross selling
  • 18. CRM Applications• Customer Segmentation• Customer / Product / Channel profitability,• Demand Forecasting• Campaign Analysis• Channel effectiveness• Sales Analysis• Cost-to-serve• Revenue Optimisation• Customer Lifetime Value (LTV)• Customer Churn / Propensity to Churn• Customer Satisfaction• Customer Complaints
  • 19. CRM BenefitsNumber of research studies has proved that:• It costs six times more to sell to new customer than to sell to an existing one.• A typical dissatisfied customer will tell 8-10 people• By increasing the customer retention rate by 5%, profits could increase by 85%• A 5% increase in retention rate can increase the profit by 60% to 100%• Odds of selling to new customers = 15%, as compared to those for existing customers (50%)• It is six times more expensive to service customers through a call center as compared to internet websites• 70% of the complaining customers will remain loyal if problem is solved• 90% of companies do not have the sales and service integration to support e-commerce
  • 20. Why CRM Projects Fail?There could be many reasons why CRM projects fail. Some of the common mistakes that occur are:• Project goals are not defined properly before the project commences.• Trying to implement CRM solutions without analyzing the underlying organizational and process changes needed to solve CRM problems.• Lack of top management commitment.• Misconception about the solution that it can create organizational change.• Underestimating CRM costs by not including factors such as customization, integration, internal resources, training costs, learning curves, ongoing maintenance (both internal and vendor license), and opportunity costs.• Not applying the knowledge gained from past project experience• Failing to closely monitor the project once it has commenced to discover deviations between actual and expected cost, benefit, and ROI.• Underestimating the amount of integration needed between CRM projects and other organizational projects like ERP and BI both from process and technical perspective.
  • 21. CRM SolutionsCRM Solutions Business GoalCustomer Self Increase cross-selling revenues and decreasedService cost of salesCustomer Service Improve customer serviceSales Force Increase sales efficiency;Automation Reduced cost of sales; Increase Revenue Decrease cost of customer support; Increase customer serviceLead Generation Increase quality leads; Reduce cost of sales; Increase revenueCustomer Service Increase Customer Service;Integration Process Quality and/or efficiency; Increase customer satisfactionEnterprisewide CRM Any or all of the above
  • 22. E-CRM• E-CRM expands the traditional CRM techniques by integrating technologies of new electronic channels such as web, wireless and voice technologies.• Essentially, ECRM helps in enabling a customer oriented organization to deliver an extended infrastructure to customers and partners in new ways – to proactively learn customer needs, add value, gain new economies in scale/ time/ costs, reach new customers, and deploy innovative retention strategies.• E-CRM ALLOWS TO CREATE – Extended customer relationships – Competitive services delivering high value – Improved product and service delivery processes – Better customer knowledge and insight – Smooth, efficient customer service
  • 23. Applications of E-CRM• Interactive voice response (IVR) systems: The automated voice systems which respond to telephone calls and offer callers key pad driven options form one method of routing and prioritizing calls and can help to reduce the duration of calls.• Intelligent e-mail management: E-mail management is a fast- growing area of CRM, and auto-response technology has huge potential. Intelligent systems can search for key words in e-mails and suggest several possible responses, ranked in order of probable accuracy.• Web: The Web offers large potential savings by encouraging visitors to find out answers for themselves. At a basic level, this consists of pages showing the answers to frequently asked questions (FAQs). More intelligent systems can search vast knowledge bases for answers.
  • 24. Supply Chain Management• A supply chain is the stream of processes of moving goods from the customer order through the raw materials stage, supply, production, and distribution of products to the customer.• Managing the chain of events in this process is what is known as supply chain management.
  • 25. Elements of Supply Chain• Production• Supply• Inventory• Location• Transportation• Information
  • 26. Managing Supply Chains• Effective supply chain management is the act of optimizing all activities throughout the supply chain, and it is the key to a competitive business advantage. Three levels of supply chain include: – Upstream Supply Chain – Internal Supply Chain – Downstream Supply Chain
  • 27. Enterprise Wide Information Portals• A typical definition of an Enterprise Portal is a single gateway to an enterprise, via corporate Intranet or the Internet, for access to relevant workflows, processes, application systems and databases - integrated using common technologies and tailored to the specific job responsibilities of each individual.
  • 28. Benefits of Enterprise Portals• Integration• Personalization• Collaboration• Community• Scalability• Security
  • 29. Summary• An integrated information system helps the organization to integrate all the functional systems. This will allow the organization to capture the data from source and share it across the organization with re-typing, re-validation.• Integrated information systems also allow organizations to extend their systems to their business partners like suppliers, distributors, retailers and customers.• The approach towards integrated enterprise systems started quite early with material resource planning (MRP) systems.• MRP basically helps organizations to manage production schedules with material management. As competitive pressures increased and users became more sophisticated, advances in planning systems became more advanced and integrated financial accounting systems to become integrated system for manufacturing execution. This was later known as MRP II.• Sharing long-range production schedules between manufacturers and suppliers was the beginning of the concept of Supply Chain Management (SCM). Integration of manufacturing with supply chain introduced the concept of Enterprise Resource Planning (ERP).• ERP systems are the integrated enterprise information system solutions that integrate modules for accounting, finance, sales and distribution, human resource, material management, and other business functions based on a common architecture that link the enterprise to both customers and suppliers.• Initial phase of ERP integrated only the routine functions and offered solution to its internal users (cross-functional, across departments).• In the second phase of ERP, the solution was extended to integrate the external users – organizations suppliers and customers.• The current phase of ERP includes the complete solution for its players in the value system. The current ERP systems are also known as Integrated Enterprise Systems, which includes end-to-end ERP system with web integration, supply chain management (SCM), customer relationship management (CRM), knowledge management (KM) and business intelligence (BI).• One of the key characteristics of ERP is it implements best practices. Best practices are the tested effectives and efficient practices being followed across the world to accomplish a process.• Best Practices represent the way an ERP company feels a particular business transaction should be carried out to maximize efficiency.
  • 30. • Summary The important guiding strategies for successful ERP implementation include: (i) ERP plans of the organization must match with its business plan; (ii) ERP may lead to business process re-engineering, which brings in structural changes, roles change, and process change; (iii) Organization need select the balanced ERP team with strong commitment from the top management; (iv) Need to provide effective training to its users; and (v) appropriate selection of implementation methodology with strong commitment to change.• CRM is an integrated information system solution that allows identification, acquisition, retention and expansion of customers. By enabling organizations to manage and coordinate customer interactions across multiple channels, departments, lines of business, and geographies, CRM helps organizations maximize the value of every customer interaction and drive superior corporate performance.• The management of customer value is a cyclical process that has four key steps: define the customer actions; determine customer expectations; design customer value model; and deliver customer value.• There are two type of CRM – Operational CRM and Analytical CRM. Operational CRM is also known as front office CRM and analytical CRM is a back office CRM.• E-CRM expands the traditional CRM techniques by integrating technologies of new electronic channels such as web, wireless and voice technologies. Essentially, ECRM helps in enabling a customer oriented organization to deliver an extended infrastructure to customers and partners in new ways – to proactively learn customer needs, add value, gain new economies in scale/ time/ costs, reach new customers, and deploy innovative retention strategies.• A supply chain is the stream of processes of moving goods from the customer order through the raw materials stage, supply, production, and distribution of products to the customer. All organizations have supply chains of varying degrees, depending upon the size of the organization and the type of product manufactured. These networks obtain supplies and components, change these materials into finished products and then distribute them to the customer.• Technology driven Supply Chain Management focuses on globalisation and information management tools, which integrate procurement, operations, and logistics from raw materials to customer satisfaction. It is also referred as E-SCM, that requires frictionless supply chain coordination of information, material and financial flows, delivering process optimisation levels never before thought possible in the old economy.• Enterprise Portal is a single gateway to an enterprise, via corporate Intranet or the Internet, for access to relevant workflows, processes, application systems and databases - integrated using common technologies and tailored to the specific job responsibilities of each individual.